Qantas announces discount Asian airline

Qantas has announced a move into Asia with a joint venture between budget carrier Jetstar and China Eastern airlines.

Transcript

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TICKY FULLERTON, REPORTER: Qantas' chief Alan Joyce is forging ahead with plans to become one of the Asian region's major players for budget travellers.

Budget carrier Jetstar will form a joint venture with China Eastern Airlines to tap the Chinese market.

It also marks the first move by a big Chinese mainland carrier into the growing no frills sector.

Phillip Lasker has the story.

PHILLIP LASKER, REPORTER: You're looking at what the Qantas group sees as untapped massive potential.

BRUCE BUCHANAN, JETSTAR CEO: The booming middle class in China has seen 300 million people already coming into the middle class and that's estimated to more than double over the rest of this decade. So the market potential is huge.

PHILLIP LASKER: It's a demographic the analysts say is underserviced by budget carriers.

COMMENTATOR: The opportunity for Jetstar is very much to take advantage of that growth in the region.

PHILLIP LASKER: So Jetstar is forming a joint venture with the Shanghai-based premium airline China Eastern to create Jetstar Hong Kong. It'll start with three A-320s for short haul flights from next year, growing to a fleet of 18 planes two years later after a joint investment of nearly $200 million.

COMMENTATOR: It's an alliance that's going to give exposure to the Jetstar business into Hong Kong and China.

PHILLIP LASKER: And it follows a well-worn path of Jetstar joint ventures in Singapore, Japan and New Zealand.

ALAN JOYCE, QANTAS CEO: We believe that we can set up a low-cost carrier here in Hong Kong at 50 per cent lower cost than the incumbents. That allows us to offer extremely low airfares which allows us to stimulate the market and allows us to grow.

PHILLIP LASKER: China Eastern says it expects the joint venture to be profitable in its third year. And Qantas hasn't ruled out establishing a premium carrier in Asia, despite this month's collapse of plans to set up a premium brand in a tie-up with Malaysian airlines.

COMMENTATOR: There is market speculation that Qantas will again look towards Singapore as potentially a hub for a premium carrier for the mainline Qantas business.

PHILLIP LASKER: To transport workers locked in a battle with Qantas over pay and conditions before Fair Work Australia, today's announcement underlines the push to dismantle a premium brand and its workforce.

UNION OFFICIAL: Qantas is cutting its routes, sending them onto cheaper outsourced overseas jobs and taking the life and money out Qantas to set these arrangements up under the Jetstar banner.

PHILLIP LASKER: But it went down well with investors who pushed the Qantas share price 2 per cent higher in a falling market.